HOW CORPORATE GOVERNANCE INFLUENCES INVESTMENT DECISIONS VIA AUDIT EFFECTIVENESS: INSIGHTS FROM PAKISTANI FIRMS

Abstract

This study examined the non-financial firms listed on PSX Pakistan Stock exchange from 2013 to 2023 to see impact of corporate governance (CG) on investment efficiency, highlight the intermediary or mediating role of the financial quality reporting. Markets in emerging states like Pakistan, the strong corporate governance is vital for the reduction of agency problems, aligning managerial function and actions with shareholder’s objectives and encourage of growth with long lasting and steady effect of growth. The study contains the generalized method of moments tactics to control issues like factors that are hidden and relationships in which results affected. Moreover, it develops a corporate governance index with a method called principal component analysis. This index provides a simple way to measure different aspects of a system of entity governance. The expected finding highlights that strong corporate governance (CG) enhances improvement of financial reporting quality, which positively influences the information efficiency (IE). This research has addition to literature by explanation on how corporate governance & reporting quality work together to improve investment results. It also offers practical insights for corporate managerial, investors, auditors, and policymakers in Pakistan development on business environment.